The Football League has relegated Southampton to League One by deducting the club 10 points.

The governing boday launched an investigation into Saints' finances after their holding company, Southampton Leisure Holdings plc, went into administration.

Southampton argued that because the club themselves were not in administration, they should avoid the mandatory points penalty.

But the League today decided the club and the holding company are "inextricably linked as one economic entity", and that the deduction stands.

As the holding company, chaired by ex-club chairman Rupert Lowe, entered administration after the League's March deadline, the points deduction will take effect this season should Southampton avoid relegation.

However, if Saints go down anyway — they are four points adrift with two games remaining — then they will begin next season in League One on minus 10 points.

The ruling is another huge blow for the club who were relegated from the Premier League in 2005 after a 27-year run in the top flight.

In a statement, the Football League explained their decision, following an investigation by accountants Grant Thornton.

It said: "The conclusions were based both on the content of the annual accounts published by the holding company, which include the club, and other information made available to Grant Thornton as part of their enquiries.

"The Board noted that Grant Thornton reported that toward the end of their enquiries co-operation with them was withdrawn.

"The holding company is solvent in its own right. It only becomes insolvent when account is taken of the position of Southampton FC and the other group companies. The three entities (the holding company, SFC and the stadium company) comprise the football club and they are inextricably linked as one economic entity.

"In light of all this advice, the Board concluded that an administrator had been appointed in respect of the club or part of its undertaking or assets. Accordingly, it was left with no alternative other than to invoke its Sporting Sanctions' regulations and apply a 10-point penalty."

If the Saints suffer the penalty this season then it could mean Charlton will avoid the ignomy of finishing bottom, even though they are eight points behind Southampton now.